Steadying the crypto ship – POLITICO


The crypto asset markets are going through their so-called “third winter”. Two things are needed to see them come out stronger: smart regulation and moves by big-name industry players to win back consumer confidence.

In the wake of the insolvencies of crypto service providers FTX and BlockFi and the collapse of TerraUSD (UST) and Terra (LUNA), the global crypto market capitalization fell to $858.43 billion on December 1, 2022, from highs of $3 trillion. in the fourth quarter of 2021.

Understandably, such high-profile flaws have unnerved investors ever since, but more than 300 million people use crypto worldwide, drawn by the transparency of transactions, efficiency by avoiding intermediaries, speed, and lower fees. low compared to traditional banking.

As the use case becomes clearer, companies that stay on the right side of the law are eager to regain investor confidence in the crypto space as a whole.

In parallel, financial regulators are stepping up their efforts to improve consumer protection in crypto markets and bolster stability.

Leading the way is the EU, which in September finalized the text of its Crypto Asset Markets (MiCA) regulation, which is expected to come into force in 2024. As part of the EU’s digital finance strategy, MiCA will regulate money email of crypto assets. tokens and asset-referenced tokens, which are commonly known as stablecoins, and crypto service providers.

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via Shutterstock

Meanwhile, in the US, an executive order on “Ensuring the Responsible Development of Digital Assets” released in March outlined the government’s approach to “addressing the risks and harnessing the potential benefits of digital assets and their underlying technology”.

Moving forward with sensible regulation

Major cryptocurrency companies, including Binance, which operates the world’s largest bitcoin and altcoin exchange, welcome the advent of sensible regulations that increase consumer confidence in cryptocurrency assets and enable responsible innovation across the board. industry. In fact, Binance argues that if these regulations had already been in place, along with proper risk management and corporate governance practices, some of this year’s market disruptions could have been avoided.

However, given the potential for divergence in regulations between different jurisdictions, Steven Christie, Binance’s senior vice president of compliance, says the frameworks need to be “comprehensive and consistent” and align with the work done by global standard-setters like the International Financial Action Task Force. .

Regulators must work hand in hand with business on implementation to ensure a level playing field across the board and create the framework that encourages innovation rather than hinders its opportunities. Binance also believes that it has a fundamental responsibility to work with regulators, and a well-regulated crypto market provides greater protections for everyday users.

Steven Christie, SVP of Compliance at Binance

Christie says that Binance and its local entities “have a policy of cooperation and compliance” with all legal information requests and legal inquiries from the government, local regulatory authorities, and law enforcement authorities related to investigations, prosecutions, and forfeiture actions.

The next generation of the internet

Regulation of the crypto-asset market is essential for innovation, including the third iteration of the Internet, Web3, to accelerate. Only when users have full confidence in the technology can there be mass adoption.

Web3 has the potential to shift power away from big tech platforms and back to users who can take control of their interactions through decentralized blockchains and smart contracts. This creates the opportunity to return revenue to content creators and users who would have incentives to innovate, test, build, and scale.

According to consulting firm McKinsey, Web3 “could mark a paradigm shift in the business model of digital applications by making disintermediation a core element,” but note that scaling up requires proper regulatory oversight.

There is no greater opportunity right now than in Web3, the next generation of the Internet. Binance’s mission is to be the infrastructure provider of the blockchain ecosystem. We are working on many Web3 experiences and solutions that will be transformative for billions of people, starting with the freedom of money.

Mayur Kamat, Head of Product at Binance

“The biggest opportunities often lie in the emergence of new and disruptive technologies,” says Mayur Kamat, head of product at Binance. “And there is no greater opportunity right now than in Web3, the next generation of the Internet. Binance’s mission is to be the infrastructure provider of the blockchain ecosystem. We are working on many Web3 experiences and solutions that will be transformative for billions of people, starting with the freedom of money.”

A thriving, innovation-friendly Web3 ecosystem, fueled by sound regulatory frameworks, could propel countries to global leadership in the next wave of technology revolution.

Globally, Web3 startups have generated $89 billion in venture capital funding and can attract top talent.

Meanwhile, the growth of blockchain technology will become a core differentiator and critical measure of international competitiveness over the next decade. By 2030, the blockchain market could boost global gross domestic product by $1.76 trillion.

Blockchain has boosted the US GDP by $407 billion, Germany by $95 billion, and the UK and Japan by $72 billion each.

A framework for stablecoins

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Increased energy efficiency will benefit cryptocurrency users and the entire blockchain industry | via Shutterstock

MiCA will protect users of electronic money tokens, which are an essential part of the crypto economy because they provide stability and strength to the market.

E-money tokens are pegged to fiat money such as the US dollar or the Euro. They have the potential to transform cross-border payments on the wholesale, retail and remittance fronts.

Stablecoins bring significant cost, time, access and transparency benefits to cross-border payments, in line with the recommendations of the Financial Stability Board, with the added benefit of value stability compared to unbacked crypto assets.

These are all factors that have seen the market capitalization of stablecoins rise from €23 billion in early 2021 to just under €150 billion in Q1 2022.

MiCA will protect consumers by requiring issuers to accumulate a sufficiently liquid reserve, with a 1:1 ratio and partly in the form of deposits.

Each e-money token user will be offered a permanent fiat redemption right free of charge. In addition, the new rules will place important electronic money tokens under the supervision of the European Banking Authority.

Enabling responsible innovation

Future EU crypto regulation will also focus on the sector’s climate and social impact to encourage more environmentally friendly practices and limit money laundering.

Crypto asset issuers will be required to disclose information on mining energy consumption and adverse climate and environmental impacts. Increased energy efficiency will benefit cryptocurrency users and the entire blockchain industry. In addition, it will enhance the environmental credentials of the sector through sustainable innovation.

The regulation will also be designed to counter concerns about the potential use of crypto assets for money laundering for drug organizations and others, and the funding of what the US government calls “rogue regimes.”

Crypto asset service providers are considered “reported entities” under the EU’s anti-money laundering (AML) rules. They will be subject to customer due diligence, transaction tracking, reporting and other AML requirements that, in some cases, go beyond the rules for payment service providers.

These provisions are in line with existing Binance policies. The company has one of the strictest AML policies in the fintech industry and plays an important leadership role in helping law enforcement combat cyber and financial crime and terrorism.

Binance also leverages blockchain technology for social responsibility through Binance Foundation programs.

A legitimate system

A smart regulatory regime that emerges from constructive conversations between policymakers and industry players, and based on global standards, will improve the crypto asset space.

Users will not only feel more secure in participating in the marketplace, but providers will be able to follow through with new and exciting innovations that support an efficient and modern financial architecture.

Binance is committed to working with regulators and lawmakers to design policies that protect consumers, encourage innovation, and legitimize this important sector.

Steven Christie, SVP of Compliance at Binance